AsianFin -- Morgan Stanley is forecasting that the U.S. Federal Reserve will deliver seven interest rate cuts in 2026, beginning in March, ultimately bringing the federal funds rate down to a range of 2.5% to 2.75%.

The Fed’s current benchmark rate stands at 4.25% to 4.5%, implying a potential 175-basis-point reduction if Morgan Stanley’s projection holds true.

This forecast diverges sharply from the Fed’s own outlook. According to the central bank’s June dot plot, officials anticipate two rate cuts in 2025 and just one in 2026. In contrast, Morgan Stanley expects no cuts next year and a significantly more aggressive easing cycle in 2026.